We aren’t happy about this.
Almost half of all checking account customers opted into their bank’s overdraft protection, according to a new study released by the American Bankers Association.
Overdraft “protection” is that nasty little program where banks will cover relatively small debit card purchases even if you don’t have enough money in your account – and whomp you with a fee for doing so.
Polls have shown that a significant majority of consumers would rather have their transactions declined.
But these fees were so lucrative for the banks that many routinely signed customers up for this “protection” unless they specifically asked to opt-out.
By last fall the public was so fed up with all of the “gotcha” fees banks were charging that the Federal Reserve finally told the banks they had to get customers to “opt-in” to the programs before imposing such fees.
The deadline was Aug. 15.
The ABA, which is the trade group for the banking industry, touted the 46% opt-in rate as a victory, and it certainly is – for them.
Many banks launched significant marketing campaigns to convince as many of their customers as possible to do so.
And they aimed those efforts at customers who have paid these outrageous fees in the past – and are most likely to pay them in the future.
We wish more people had said no. There is no reason to have overdraft protection. Wouldn’t you rather pay cash, or take a pass on your $3 cup of coffee, than wind up paying $30 for it?
(The average overdraft fee is $27 according to the most recent Fed survey we’ve seen.)
If you signed up, just remember.
It’s not too late to change your mind.
You can opt out of overdraft protection at anytime, and that’s what we think you should do.